Independent Schools on the Brink

April 21, 2020Panelists: Debra Wilson, Ari Betof,

John Gulla, Jim Hulbert & Kristen Power

A Confidential Webinar for Schools

Struggling to Survive the COVID-

19 Pandemic

A collaboration of thirty-three state, regional, and national associations in support of their member schools.

Debra WilsonPresidentSouthern Association of Independent Schools (SAIS)

Ari BetofPresident

Organizational Sustainability Consulting

John GullaPresident

The Edward E. Ford Foundation

Jim HulbertPartner

The Jane Group

Kristen PowerSenior Director of Membership & Business Development

The Enrollment Management Association (EMA)

Schools on the Brink:A Confidential Webinar for Schools Struggling to Survive the COVID-19 Pandemic

Welcome & Agenda • The viability crisis: context, leadership, & governance

• Identifying viability issues and then what?

• Financial sustainability & organizational stewardship

• Enrollment management, net tuition revenue, & financial aid in a COVID-19 world

• Will the CARES Act (or future funding) save us?

• Strategic communication in times of vulnerability

• What to do when there is no path forward?

• Questions

• Closing thoughts

Schools on the Brink:A Confidential Webinar for Schools Struggling to Survive the COVID-19 Pandemic

The Viability Crisis:Context, Leadership,

& Governance

John Gulla President

The Edward E. Ford Foundation

What happened?

● Epochal event- magnitude still unknown- not 9/11 or 2008-09 in scale but much larger- akin to WWII in global effect

● From 3% of American children being homeschooled to 100% going to school at home overnight

● K-16 educational ecosystem- what group has managed this transition most successfully?

● All that this experience has revealed about us

What will happen?

What we have learned so far

● Independent School teachers, leaders and staff deeply committed to students and their profession

● Facilities arms race - school is not the buildings

● “Plans are worthless, but planning is everything”

● Tools of technology are powerful

What are the challenges?

● “Third great extinction” of schools was already underway B.C., pandemic won’t have caused, only accelerated

● Demographic, economic, competition and psychology

● Head, Board & Governance challenges issues of honesty, issues of structure

● How difficult is it to close schools?

● VUCA world on steroids

What are the opportunities?

● Time for BIG, IMPORTANT questions

○ What is the purpose of school?

○ Why are we so wedded to the agrarian school calendar?

○ We had a factory model. We’re now in a hastily created, physically distributed, networked cyber academy. What do we go back to?

○ 3 financial levers, 3 buckets

Identifying viability issues and then what?

Debra Wilson President

SAIS

Viability… Or a lack

thereof

● Cash flow issues○ Using next year’s deposits to pay for this year’s

expenses○ Perpetual saving by an “angel donor”○ Endowment / restricted gifts used inappropriately○ Opting for paying penalties over meeting debts○ Beyond credit limit, unable to secure additional

credit ○ Repeat of same board conversations around shuffling

money, reducing staff, delay of needed work

● Conditional audit● Ongoing enrollment issues – attrition, application decline,

yield issues● Demographics would seem to support enrollment

Schools on the Brink:A Confidential Webinar for Schools Struggling to Survive the COVID-19 Pandemic

General Approach: Three Horses

Continuing the mission

● Back to basics: Revisit mission and business model

● Hard conversations and distinct decisions ● Identify path to sustainability● Often radical – tuition reset, mission reset,

can close for a year ● Can include a shift to charter or some other

model

Finishing the mission:

Responsibly closing the

school

● Involves very real timelines: ○ When will decisions have to be made?○ Holding to the timeline○ Notice for staff and families well in

advance (ideally at least winter of the year before)

● Ultimately shifting board from working board to closing board (smaller, distinct focus)

● Close-out of remaining assets, records, etc.

Mergers &Partnerships

●Mergers○ Good mergers take time

to ensure cultural fit○ Can gain scale (work to

maintain it)○ Greater staffing depth○ Embraces less supply

●Partnership

○ Share staff (language, specials)

○ Cross-over programming

○ Leverage facilities

○ Reciprocal tuition remission

○ Alignment for feeder patterns

○ If appropriate, can also gain scale

Financial Sustainability & Organizational Stewardship

Ari Betof PresidentOrganizational Sustainability Consulting

Schools on the Brink:A Confidential Webinar for Schools Struggling to Survive the COVID-19 Pandemic

Spectrum of Financial & Organizational Health

Viability Stability Sustainability

Schools on the Brink:A Confidential Webinar for Schools Struggling to Survive the COVID-19 Pandemic

Spectrum of Financial & Organizational Health

ViabilityMust Focus on Survival

in the Next 12-24 Months

StabilityIs the Steel of the Building as

Strong as You Think?

SustainabilityViability in Next 10+ Years Not

in Question

Stability

Schools on the Brink:A Confidential Webinar for Schools Struggling to Survive the COVID-19 Pandemic

Our Fukuhima Tsunami CrisisEarthquake tsunami nuclear disaster aftermath

Our Fukushima Disaster:What Can We Learn from Compounding Crises?

Schools on the Brink:A Confidential Webinar for Schools Struggling to Survive the COVID-19 Pandemic

COVID-19 Pandemic vs The Great Recession

COVID-19 vs Great Recession:How do these two crises compare?

Schools on the Brink:A Confidential Webinar for Schools Struggling to Survive the COVID-19 Pandemic

Schools on the Brink:A Confidential Webinar for Schools Struggling to Survive the COVID-19 Pandemic

A Model for Decision-Making

CommunityCentered

MissionDriven

DataInformed+ +

The Seduction of False Optimism

Schools on the Brink:A Confidential Webinar for Schools Struggling to Survive the COVID-19 Pandemic

ModelingIn support of mission-driven, community-centered, data-informed decision making

Iterative data modeling gives us a clearer picture of what could happen in times of uncertainty

Schools on the Brink:A Confidential Webinar for Schools Struggling to Survive the COVID-19 Pandemic

Schools on the Brink:A Confidential Webinar for Schools Struggling to Survive the COVID-19 Pandemic

Schools on the Brink:A Confidential Webinar for Schools Struggling to Survive the COVID-19 Pandemic

Financial Modeling

Iterative data modeling gives us a clearer picture of what could happen in times of uncertainty

In support of mission-driven, community-centered, data-informed decision making

Organizational SustainabilityConsulting

Schools on the Brink:A Confidential Webinar for Schools Struggling to Survive the COVID-19 Pandemic

Introducing Our Model School:

Corona School”Causing havoc since December 2019”

• 300 student• K-12 school• $31,586 tuition• 25% students on finaid• $18,353 avg finaid grant• $5MM endowment

Schools on the Brink:A Confidential Webinar for Schools Struggling to Survive the COVID-19 Pandemic

Modeling the Impact of COVID-19 on Independent Schools

Enrollment Management, Net Tuition Revenue, & Financial Aid in a COVID-19 World

Kristen PowerSenior Director of Membership & Business Development

The Enrollment Management Association (EMA)

6 in 10 Americans have lostjobs, hours, or income.

Americans who have filed initial jobless claims to around 22 million, or roughly

13.5% of the labor force, since March 14.

Since March 1, EMA has connected with over 3,000 enrollment leaders

and with nearly 400 prospective parents.

Here’s what we’ve learned...

Enrollment leaders are under pressure.

● Delayed contract return dates

● Increases in financial aid requests

● Tuition remission?

● Future predictions is less reliable

● Enrollment leaders are uncertain how to assess

new prospects without traditional

tests/assessment tools (all divisions)

Enrollment leaders are under pressure.

● Boarding school enrollment leaders are concerned about the

return of international students (in some cases,

international student enrollments represent between 40%-

60% of operating revenue.)

● School leaders report challenges in online learning with

synchronous systems and international students?

● School leaders report feeling unclear about their school’s

value proposition with distance learning; replication of the

same experience seems daunting

● Pre-existing questions about the school’s financial model are

more acute

Enrollment leaders are pivoting

● Virtual events, revisit days, welcome days

● Remote teams

● Same mission & value proposition… different tools

to share it

● MAIN QUESTION: How do we demonstrate the

value of our unique online learning program & our

community?

Families under pressure

● Lost a job?

● Working from home?

● In a directly affected industry?

● How much can students replicate?

● Uncertainty about the future, how to make big financial decisions?

● How to hold synchronous learning with students in different time

zones?

● Unclear value proposition if I’m the ‘teacher’ at home

Financial Aid: Have we been here before?

● After the 2008 financial crisis according to NAIS's

DASL data:

○ Number of FA applications went up 16.7%

○ Number of students receiving aid went up

17.8%

○ Total FA spending per student went up 21%

● This crisis won’t be better

Increased FA RequestsHow many financial aid requests are you seeing this year

compared to last year?

“This is a period of radical uncertainty, an order of magnitude greater than

anything we’re used to.”-Adam Tooze, Columbia University

Recommended Actions - Communication

● Connect & share with your peers

● Hold multiple virtual events

● Leverage community: reading buddies, afternoon

clubs, driveway takeover, parent reception

● Are they going to fault you for trying?

● Become a values-driven storytelling machine

● Put humans and values in front

Recommended Actions - Enrollment

● Work with board / finance

● Develop three tier projection

○ 10% attrition

○ 20% attrition

○ 30% attrition

● Set three price points (in-person, online, hybrid)

● Aggressively explore serving expanded student

base (online classes, language, sports, enrichment

programs?)

Recommended Actions: Financial Aid● Prepare for an increase in FA applications through the summer

○ From current full-pay families

○ From current families already on aid

○ From families prospective families

○ From faculty/staff

● Are you able to create a FA emergency fund to cover your families requesting aid?

● Create a policy for new FA inquiries due to COVID-19, and think about the following:

○ Will you have them complete the standard form? If not, what will your baselline

be? Monthly income and expense statement?

○ Families who haven’t yet lost their job will be concerned they and may ask for FA

- what will your stance be?

○ Set guidelines - should a family receive aid and then go back to work, clearly

define your positioning and expectations

● Plan and budget for the future - lessons learned from 2008

Examples of COVID Communicators● Comprehensive website

○ Lakeside School

○ Georgetown Day School

● Virtual Handbook

○ Salisbury School

○ Lawrenceville “VirtualVILLage”

● Updated Financial Aid Webpage

○ The Alexander Dawson School

● FAQ page

○ Choate Rosemary Hall

Will the CARES Act (or future funding) save us?

Debra WilsonPresident

Southern Association of Independent Schools (SAIS)

CARES Act

• Loans – Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL)

• Certifications

• Receipt of federal financial assistance

• Personal guarantee on EIDL (over $200k)

• More $$s underway

• Other provisions: Charitable giving ($300 above the line and unlimited AGI for itemizers), unemployment benefits above state levels, access to retirement funds

State Grants

• Equitable services calculation

• Do not trigger federal financial assistance (as long as not tangible $$s)

• May provide access to funding or services for students with limited internet access

• May increase special ed support

PR Note

• Families asking about schools receiving funding

• Just because you can, should you?

• If truly facing viability issues, yes.

• Long grey area between having trouble meeting payroll now and might have some issues in November but have a lot of reserves

• What kind of runway do you have?

What might save you...

• Now is the time to negotiate• No bank actually wants your school• Renegotiate services contracts• Renegotiate payment plans• Renegotiate debt to creditors (including

government agencies)• Renegotiate terms of restricted gifts

• There are giving incentives in the mix• Particularly for high income, large gift

donors• Increase of itemization from 60% of AGI to

100%

Strategic Communication in Times of Vulnerability

Jim Hulbert Partner

The Jane Group

Guideposts:3 Cs of Communications

Calm…Clear…Consistent“Clarity and candor are essential in crises – and

so is generosity of spirit.”

Jon Meacham

Now Let’s Talk About Money

● High level of transparency of process regarding a school’s

decision making on tuition or refunds – provide specific reasons for making the decision.

● Be clear that the reasons communicated for financial decisions

are not just about dollars and cents but speak to mission, values, and the entire community.

Strategic Points

● As you create financial and operations plans (continue, close, merge/partnership)

● 2nd Plan – strategic communications plan

● Should not communicate in a vacuum – what have you said before?

● Timing of announcement

● Don’t get a second chance to make a first impression

Timing – A Pain Point

● Don’t go out too early without a plan; yelling “fire” in a crowded theatre.

● There is a fairly predictable roadmap for closing.

● A key issue on closing a school is to schedule the announcement

so that students/families and staff/faculty have ample time to secure placement and employment in other independent schools.

● Optimal time to announce is early November.

Your Crisis Communications ToolboxWhat should be in it?

● Holding statement

● Community letter (as determined by leadership) for entire community regarding the crisis

● Q&A for Head and Board that focuses on the tough questions and pivot points

● Talking points for:

○ Faculty in response to parent inquiry

○ Leadership in response to alumni inquiry and others

○ Board of Trustees in response to colleagues, parents, others

● Media policy

● Draft a timeline with flexible dates (live document) – Deadline Manager

Refunds and Tuition Issues

● Control the narrative.

● Acknowledge the issues, even if you have not made decisions yet.

● Educate your community on your school’s financial reality.

● Evaluate possible rebates for ancillary fees.

● Follow up with non-renewals.

Alumni Reaction

● Anticipate alumni reaction.

● Alumni may have expectations that they can save the school.

● What is the nature of the sustainability challenges at your school?

● Will an infusion of money, in and of itself, solve the sustainability and enrollment issue?

● While you focus on existing parents, don’t forget the alumni.

Thank You!jim@thejanegroup.biz (630) 707-2509

What to do when there is no path forward?

Closing…

• Will need help: lawyers, accountants, other schools

• Timeline is crucial: students, families, & staff

• Processes to support community through transition

• Communications vital: donors & alumni

• Celebration of the history of the school

• Lots of process and fiduciary oversight going on beyond final year

• State filings, custodian for records, final distribution of assets, etc.

Schools on the Brink:A Confidential Webinar for Schools Struggling to Survive the COVID-19 Pandemic

Questions?

Debra Wilson@debra_p_wilson

sais.org

Ari Betof@AriBetof

orgsustainability.com

John Gulla@jgulla

eeford.org

Jim Hulbert@jane_group

thejanegroup.biz

Kristen Power@kcareypowerenrollment.org

Final Thoughts...

On behalf on all thirty-three state, regional, and national associations…

...thank you!